Economics history never repeats itself

It been a while that I have been unblogging due to my finance exams last month. Two days ago, I had attended the Sime Darby Lecture Series on “Why is financial market volatility so high?” by Professor Robert Fry Engle, the 2003 Nobel Laureate for Economics and the Micheal Armellino Professor of Finance of New York University’s Stern School of Business.The event was set on a beautiful evening started by orchestra and fine dining, and a lecture. The interesting part is the Q&A session where the public are given chances to ask questions.

 

Oh my, I could sense that some of the public are skeptical and worry about the current world economics trend; look like retrenchments are going to be rampant, inflation, currency devaluation, recession etc. Wow, scary huh……wait till you read the end of this article.

 

 “History never repeats itself; man always does” ~ Voltaire

Tulipomania A tulip, known as “the Viceroy”, displayed in a 1637 Dutch catalog. Its bulb cost between 3000 and 4200 florins depending on size. A skilled craftsman at the time earned about 150 florins a year.

 Tulpenmanie in Dutch; Tulip mania or tulipomania in English; was a period in the Dutch Golden Age during which contract prices for bulbs of the newly-introduced tulip reached extraordinarily high levels and then suddenly collapsed. At the peak of tulip mania in February 1637 tulip contracts sold for more than 20 times the annual income of a skilled craftsman. It is generally considered the first recorded speculative bubble. The term “tulip mania” is often used metaphorically to refer to any large economic bubble.

800px-tulip_price_index1_svg2

A standardized price index for tulip bulb contracts, created by Thompson 2007, p. 101.

 

 The Great Depression was a worldwide economic downturn starting in most places in 1929 and ending at different times in the 1930s or early 1940s for different countries. It was the largest and most important economic depression in modern history, and is used in the 21st century as an example of how far the world’s economy can fall. The Great Depression originated in the United States; historians most often use as a starting date the stock market crash on October 29, 1929, known as Black Tuesday. The end of the depression in the U.S is associated with the onset of the war economy of World War II, beginning around 1939.

   

american_union_bank

Crowd at New York’s American Union Bank during a bank run early in the Great Depression.

The depression had devastating effects in the developed and developing worlds. International trade was deeply affected, as were personal incomes, tax revenues, prices, and profits. Cities all around the world were hit hard, especially those dependent on heavy industry. Construction was virtually halted in many countries. Farming and rural areas suffered as crop prices fell by roughly 60 percent. Facing plummeting demand with few alternate sources of jobs, areas dependent on primary sector industries such as farming, mining and logging suffered the most. However, even shortly after the Wall Street Crash of 1929, optimism persisted; John D. Rockefeller said that “These are days when many are discouraged. In the 93 years of my life, depressions have come and gone. Prosperity has always returned and will again.”

gdp20-40

USA GDP annual pattern and long-term trend, 1920-40, in billions of dollars at constant prices. True to his words, prosperity had returned since 1932.

The causes of the Great Depression are still a matter of active debate among economists. The specific economic events that took place during the Great Depression have been studied thoroughly: a deflation in asset and commodity prices, dramatic drops in demand and credit, and disruption of trade, ultimately resulting in widespread poverty and unemployment.

After looking at these past economics collapses, you must be wondering, are we on the beginning of the history repeating. Okay, I would say that I am not the Crystal Ball. Hence, you may have your own predictions.

Hey, cheer up guys! Did you just read about John D. Rockefeller said that prosperity has always returned and will again.

Economics recession is always relates to the correction to the unbalances in economics cycles. I predicted that the world economy will rise again in year 2013. In the mean time, this is the golden opportunity for you to rise up economically.

It is now.

 

1)           Pull out from any speculative investment like stock markets

2)      Remain in your job if you are lucky enough to still holding one

3)      Spend your money prudently

4)      Do not hold credit card debts

5)      Acquire knowledge

6)      Gain entrepreneurship skills by studying past business success and failure cases

7)      Start building your business in the less competitive environment during recession

 

Good lucks!!!!!!!!!!!!!

 

 

 

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